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A blog discussing the macro forces shaping the global economy today and over the horizon.

The Smartphone Is Changing Retailing for Good

Pocket-sized communication devices seem to be taking over our lives — and exercising our thumbs — more than many retailers realize.

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“ The effect on future revenue growth for large and small retailers alike is certain to be profound.”

“The smartphone revolution is under-hyped…more people have access to phones than access to running water,” says Marc Andreessen, entrepreneur, investor and cofounder of Netscape.

In terms of time spent, mobile (i.e. smartphone and tablet) has reached a tipping point, eclipsing desktop and laptop usage, which has declined steadily from a peak in March 2015, as reported in The Wall Street Journal.

According to data from comScore, the online research company, mobile time spent was almost double that of desktop in March 2016, and was up more than 13 percent compared to the same month last year.

The effect on future revenue growth for large and small retailers alike is certain to be profound, as seen in the newly published 2016 UPS Pulse of the Online Shopper™ study — especially in terms of purchases shifting to digital, with smartphones seen as the driving force in online shopping behavior.

It’s no surprise that the percent of online purchases has trended up the last three years since UPS first developed the study five years ago with comScore, Inc., However, this year is the first in which these avid online shoppers say that they make over half of their purchases online (excluding groceries).

In fact, Millennials make 54 percent of their purchases online, compared to 49 percent for non-Millennials.

Earlier studies indicated that shoppers used mobile devices mostly for research and info gathering, but turned to their desktops and tablets to actually make purchases. While desktops or laptops are mainstays, we’ve observed a sea change in behavior this year.

Click here to download whitepaper.

Significantly, 44 percent of smartphone users and 44 percent of tablet users make online purchases on their device — and one in four smartphone users (25 percent) and one in four (24 percent) of tablet users say they plan to shop more on the device in the next year.

The digital handwriting on the wall: Optimize online access for small-screen handhelds, or fall behind.

Support for smartphones is particularly important for retailers targeting Millennials or GenXers. Among Millennials, 63 percent purchase via smartphone, with GenXers a close second at 41 percent.

In contrast, online shopping among Baby Boomers and Seniors (70+) is largely overwhelmingly PC-based, since only 19 percent of Boomers and 8 percent of Seniors purchase on a smartphone.

You can expect even faster growth for smartphones as user experiences improve, screen sizes increase and apps become more user-friendly. The UPS study found, for example, an 8 point year over year increase in smartphone shopping satisfaction, compared to a 4 point gain for tablet users and only 1 point for desktop users. So the momentum is gaining.

How shoppers use mobile devices

Taking a deeper dive into the reasons why shoppers choose to use smartphones can be valuable.

In the study, of the 44 percent who purchased products using their handhelds, 31 percent do so because they “always have their smartphone with them” and it’s more convenient. And 28 percent say they use it while in the store for research.

They may turn to their smartphone to compare prices among retailers, search for a coupon or check product reviews on social media.

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“The question is whether to invest limited resources on improving the mobile web or build an app.”

Whether they use a smartphone to purchase or not, 72 percent of mobile device users said they use handhelds at least monthly to track delivery of an order. Some 69 percent use it monthly to compare prices among retailers and 64 percent used their smartphone at least monthly to research products prior to visiting a store.

Interestingly, four out of five mobile shoppers say they have used a retailer’s app instead of a web browser. Since app use spikes up among the most loyal retail customers, that may serve as an incentive for retailers to invest in developing an app to reach their most loyal and frequent online shoppers—and give their thumbs a good workout.

While our previous surveys have shown that consumers tend to comparison shop less while using a retailer’s app, data from comScore Q1 2016 report indicate that 45 percent of consumers surveyed say they are comfortable having three or fewer retailer apps on their smartphone at one time. And mobile app visits to the retail category finally surpassed mobile web visits in Q1 2016.

When I talk to retailers, one key question that comes up is whether to invest their limited resources on improve the mobile web or build an app.

My view is that while mobile web is basic to existing as a retailer in today’s world, not all retailers are a good fit for a mobile app that consumers will use. Typically, there are three types of retailers for whom apps will fit and pay off on an investment:

Retailers/marketplaces with a wide product catalog that can serve as a single destination for consumers, such as Amazon, eBay, Walmart or Costco.

Omnichannel retailers who can use mobile apps to bridge the gap between the physical and virtual world. Examples include Target, Kohl’s and Home Depot.

Retailers who occasionally engage with consumers, and can offer either unique products or a short-term intense experience, e.g. Sephora, David’s Bridal.
In a future Longitudes blog, I will explore the Millennials’ adoption of all thing tech, particularly the smartphone.

For now, it’s easy to predict that the changes in retail driven by online and the smartphone are “for good,” as this blog title suggests. As in permanent.

The next generation (Generation Z) will likely continue to accelerate embracing the smartphone, having grown up using them (or looking at them anyway) since the ride home from the maternity ward.

For more details on the many ways tech-savvy shoppers are transforming the retail landscape, download the complete study in an easy-to-read e-book format at www.ups.com/insideretail. The study fully explores the way digital shoppers have evolved, reviews the latest in channel dynamics and new logistics challenges retails face. Data was collected from over 5300 online shoppers and analyzed with the help of the e-tailing group, inc., a Chicago-based consultancy.

Every morning, wake up to the blog that gives you the latest trends shaping tomorrow.

Bala Ganesh is Vice President of the Advanced Technology Group at UPS. He oversees efforts to apply cutting-edge technologies to create the company's Global Smart Logistics Network.

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Reprinted with permission of Longitudes, the UPS blog devoted to the trends shaping the global economy.